The Competition and Consumer Act Amendment Act (No1) 2011 introduces the law prohibiting price signalling and information disclosures and is due to commence on 6 June 2012.
The new law prohibits:
- Private disclosure of price-related information to a competitor
- Disclosure, whether public or private, of any relevant aspect of a corporation’s commercial strategy (including discounts, credits, rebates etc), where the disclosure aims to substantially lessen competition.
Price signalling involves the practice of communicating or signalling a company’s price rises or pricing initiatives to its competitors for the purposes of having a competitor follow it. It is conduct that does not qualify as actual collusion between competitors but intends to take that form.
A number of exemptions may be available for certain disclosures.
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Draft price signalling regulations
The draft Competition and Consumer Act Amendment Regulations (2012) (No. ) (Draft Regulations):
- Gives effect to the government’s desire to initially target the banking industry
- Sets out the process that must be followed before prescribing the application of the price signalling legislation to other classes of goods or services (or types of suppliers of goods or services)
- Prescribes the forms and fees for parties to apply to the Australian Competition and Consumer Commission (ACCC) for immunity from proposed disclosures that could otherwise contravene the price signalling prohibitions.
These regulations are intended to commence on 6 June 2012, to coincide with the commencement of the price signalling laws.
Initially, the ACCC was concerned with the practices of the major banks in determining interest rates, and accordingly, the Draft Regulations prescribes the application of the price signalling laws to initially regulate the banking industry. Essentially, the law will apply to a good or service provided by authorised deposit-taking institutions (ADIs) regulated under the Banking Act 1959, in relation to either:
- The “taking of money on deposit (otherwise than as part-payment for identified goods or services)” or
- “Making advances of money”.
Proposed process for regulating other industries
The Draft Regulations set out the process for prescribing the application of the laws to other industries. The proposed Regulation 49 states that before the Governor-General makes a regulation prescribing a class of goods or services to be subject to the price signalling laws, the Minister must be satisfied that any consultation that is considered to be appropriate and that is reasonably practicable to undertake, has been undertaken. This requires the Minister to consider whether the consultation included:
- Experts in the fields relevant to the proposed regulation
- Those affected by the proposed regulation
- If appropriate, invitations to make submissions by a specified date or consultations involving public hearings.
The ACCC has in the past openly expressed its concerns about the pricing practices of other industries such as the petrol industry. It would therefore be unsurprising if the petrol industry becomes the next target under the consultation process, and ultimately the new law.
Immunity from price signalling prohibitions
The new price signalling law will extend the authorisation and notification processes available under the Competition and Consumer Act 2010 to include price signalling. Accordingly, a party may be able to seek immunity from action under the price signalling prohibitions if the proposed conduct provides a net public benefit. The Draft Regulations propose to add Form BA and Form GAA to the current forms used for authorisation or notifications.
Those in the banking industry (including credit unions, building societies, credit card institutions, providers of purchased payment facilities and authorised non-operating holding companies regulated as ADIs pursuant to the Banking Act 1959) will need to:
- Review its practices and exercise caution when communicating or disclosing information relating to its price rises or other pricing initiatives
- Seek specialist competition law advice if in doubt as to whether something is legitimate business conduct and how the new price signalling laws will impact upon its business
- Update its trade practices compliance program and training of staff to ensure they are aware of the new price signalling laws.
For those in other industries (especially the petrol industry), it will be important to monitor and assess how the new price signalling law and proposed consultation process is likely to impact them.